Financing activity predicted to rise as year progresses

With optimism and an eye toward new business and increased acquisitions activity, according to interviews with Security Systems News.

While the pendulum has swung in a conservative direction over the past year, Henry Edmonds, chief executive officer of SLP Capital in St. Louis, said it's heading back to where it had been.

"We're coming to the end of the cycle," he said, noting markets and values are stabilizing. "This is a good time for companies to borrow, to do acquisitions," Edmonds noted. "We expect 2002 to be a good year for us and for dealers. We'll see a lot more deals in 2002."

Explaining he's "not a Pollyanna," Paul Sargenti, president and chief executive officer of Security Alarm Financing Enterprises, in San Ramon, Calif., said he does believe the economy in general and the alarm business in particular will pick up.

"Things will improve, but not by leaps and bounds," Sargenti said. "It will be more predictable. I see it as typical of coming out of any recessionary period."

The recession in 2001, he said, "is just the cold reality that there is a business cycle."

Asked to predict when the recession might ease, Sargenti said consumer confidence is already on board and evidence of its impact "will be measurable" by the third quarter.

Dan Linscott, vice president at Financial Security Services Inc. in Dallas, said he expects to see a return of account acquisitions "that are priced reasonably." The price of accounts, he noted, "makes it a greater economic possibility for dealers to grow that way."

Linscott also said he sees room in the market "for local, quality, independent dealers."

Washington-based MCG Capital Corp. "is bullish on the industry," said Managing Director Greg Spurr, who sees opportunities for growth on the commercial side of the security business.

"When times get tough, people think more and spend more on security," Spurr said.

One cautionary note from Spurr was that a prolonged recession could see an increase in attrition of residential accounts as individuals struggle to pay their bills.

Diane Rooney, senior vice president at Citizens Bank of Massachusetts in Boston, predicted more opportunity for acquisitions in 2002 after a slow year in that segment.

"We're hoping there's more activity," she said, "and we're poised to help companies with financing."

The year 2001 also saw the impact of the Sept. 11 terrorist activity on the capital markets and the economy.

Spurr said the events of Sept. 11 had a dual effect on the industry. Initially, he said, it shut down the capital markets. Even after they reopened, he said, "it still took a bad situation (the recession) and made it worse. It was even harder to get financing than before."

Yet, Spurr explained, the emphasis on security, brought about by terrorism concerns, sparked an interest in new business among commercial dealers and renewed attention from the investment community.

"Investors who might (not) have been interested before are showing an interest now," Spurr said.

Rooney said she saw business rebound in October, although the cre-dit markets were tightening long before Sept. 11, she said.

Businesses that have bene-fitedÃ‚Â from heightened interest in security are commercial integrators and smaller commercial installation accounts.
Edmonds noted large corporations, with security projects already in the pipeline, likely accelerated their spending on security. But in general, he said, following the events of Sept. 11, "there was no big boom, no big fall off."

Sargenti said access control and video providers, especially those serving office buildings, schools or other public buildings, saw a positive response in the wake of Sept. 11.

But for lenders and borrowers in general, "if they were already hesitant, (Sept. 11) may have given them further pause," he said.